Online Ad Revenue Continues Rebound

By: Ann M. Mack

(Adweek IQ) Internet advertising revenue notched its third consecutive quarter of growth in the second quarter, rising nearly 14% from the year-ago period and 2% from Q1 to $1.66 billion, according to a report released Tuesday.

The figures are from the Interactive Advertising Bureau-sponsored Internet Revenue Report, conducted independently by the New Media Group of PricewaterhouseCoopers (PwC).

For the first half of 2003, Internet ad revenue totaled $3.29 billion, a 10.5% boost over the first six months of 2002, according to the report. Earlier this year, TNS Media Intelligence/CMR reported that Internet ad revenue was $3.2 billion for the first half, up 15.3% from the same time in 2002.

“With Internet usage and broadband adoption continuing to escalate, marketers are throwing their weight and dollars behind interactive advertising,” said IAB President and CEO Greg Stuart.

Other factors contributing to the sector’s rebound include increased buy-side demand, firming prices, an improved selling process, more performance deals, fewer non-cash deals and continued investment from consumer advertisers, according to Pete Petrusky, director of new media at PwC.

Keyword search advertising continued its meteoric rise. This form of advertising, in which companies pay for a favorable spot or more frequency in search-result listings, represented 31% of total ad revenues for the second quarter, more than tripling its stake over the year-ago quarter.

Rich media doubled its share, increasing from 3% in Q2 2002 to 6% in Q2 2003. The growth possibly reflects advertisers’ recognition of faster broadband adoption, according to the report, which in turn offers more opportunities for ads that deliver sound and full-motion video.

Keyword search and rich media advertising continued to take share away from display ads and sponsorships, which at one time dominated the landscape. Display advertising, or banners, accounted for 22% of Internet ad revenue in the second quarter and sponsorships represented 11%, down from 32% and 24% in Q2 2002, respectively.

Classified advertising grew slightly from 15% to 18%, while e-mail marketing and interstitials held steady, bringing in 4% and 3% of ad revenue on the Web in the second quarter, respectively.

Meanwhile, keyword search as an ad format represented 15% of online ad revenue in 2002, more than tripling its stake over 2001. Classifieds held steady, bringing in 15% of ad revenue on the Web in 2002.

The study also found that consumer goods advertisers continued to spend the most dollars online, representing 35% of all Web advertising. The computing category comprised 20% of advertising on the Internet, while financial services, media and business services made up 13%, 12% and 10%, respectively.

The rise in search advertising caused a ripple effect in pricing models, the study said, capturing 35% of second-quarter revenue, up from 15% in the same period a year ago. Hybrid deals, a combination of CPM (cost per thousand) and performance, declined from 39% in Q2 2002 to 20% in Q2 2003. And the CPM pricing model remained relatively unchanged, comprising 45% of all deal revenues in the second quarter.

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